Hidden Treasure*

m delighted to be able to use this issue of Rice Today to welcome everyone to Phuket for The Rice Trader World Rice Conference 2010. Rice industry players from around the world are gathering in Phuket, Thailand, on 12-14 October to receive their annual dose of market updates and to discuss the spectrum of issues that dominate the rice trading business. This event will also hold the second rice tasting contest, which will add an interesting retail dynamic that, more importantly, reveals select varieties of rice that are treasured around the world. It is an honor for The Rice Trader to host this international event as it is a reunion of friends, industry leaders, peers, and, most significantly, it as an opportunity to examine some very important questions that currently expose the fragile supply that provides a blanket of food security to the world. It is in the busiest and quietest times that I find the most wisdom these days. Perhaps, this is a secret to life, as one travels and learns from the days that fly by. For 50 years now, scientists have been working to keep the world fed, with each milestone contributing to the collective achievement. The Green Revolution in the 1960s spawned demandas well as the next generations need for another revolution. This is just a cycle of life, with the belief that the genius that scientists have shown in increasing our food supply comes with time and an ever-expanding populations intellectual resources. The ingenuity that the human race demonstrates, however, is often matched by the many challenges that unfold over time, whether the population is 7 billion or 10 billion. But, I believe that we will rise to the occasion. This means that sometimes things get out of line. Are we investing in the future of our children or living in a way that will negatively impact the coming generation? The problem we see is that high and low prices are equally bad, as often occurs in the midst of a crisis. It can then take decades for another effect to occur, which could cause prices to level off. The current market, since 2007-08, is interesting in that the runup, falloff, and what looks like the start of another runup have, in fact, kept investments at bay largely because of the uncertainty and volatility in global markets (both financial and commodity) that have led to a lack of clear direction for the future. There are also more questions than answers today, with the lessons from 2008 suggesting that most market players would prefer to make commercial decisions based on actual rather than possible events and news. Risk is a key feature and few in the market want to take any risk at present. Russias recent decision to ban wheat exportstogether with the news of floods in China and Pakistan that have possibly reduced output and, consequently, exportable ricehas left

analysts re-calculating the global food balance, even as India looks well placed to reveal a strong output rebound. The global wheat trade is four to five times the size of rice trade (125 million tons of wheat are traded, while only 25 30 million tons of rice are typically traded globally); hence, the changing global food balance adds more volatility, especially to rice. The lightest shift to or away (as buyers, such as Africa, adjust to prices) therefore greatly affects rice export volumes. In fact, one could say that a price increase or decrease in wheat has a four to five times larger effect on rice. China is one good example. Recent floods (and the drought before that) have already left an imprint on trade, given Chinas increased purchases of corn (maize) and other grains. Chinas large grain buffer stocks have added a stabilizing effect, but not all countries can boast such an emergency reserve. The current global grains situation continues to play out, with new supply and export figures affecting the volumes and prices of all grains and cereals in the months ahead. Risk is leading the rice trade away from making any important trade decisions as most would prefer to act based on actual events rather than face up to bullish rice markets. Thailands nearly 6 million tons of stocks come into focus as the expected government releases are factored into the market. Furthermore, damage estimates in Pakistan and the harvests across Asia also reveal the true extent of export availability (in terms of size and timing of availability), which somehow provides a better knowledge of the risks ahead. In the U.S., long-grain availability has responded well to global demand at what looks like a very competitive price. Japonica rice is more bullishmade especially clear by the supply concerns in Egypt and the lack of any significant exports from Australia. To make the situation more interesting, the demand for japonica rice is expected to double the largely U.S. supply, revealing the possibility of blending as a solution for more price-sensitive buyers. Overall, markets are walking on edge, teetering between the belief there is not enough rice and the idea that the upcoming harvest season will bring new arrivals soon. Time will tell.

Jeremy Zwinger Publisher

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* The opinions expressed here are those of the author and do not Today October-December 2010 the International Rice Research Institute. Rice necessarily reflect the views of